CDNS
Cadence Design Systems, Inc.
$373.59
Platform & Compounding FCF
80%
Two-stage FCF DCF
Strong
·
Conviction
Overvalued
Trading 70.9% above fair value
You pay
$373.59
Bear
$136.72
Fair
$218.61
Bull
$311.86
Bear
$136.72
-63.4%
10% stage 1 growth, 11% discount
Fair
$218.61
-41.5%
16% stage 1 growth, 11% discount
Bull
$311.86
-16.5%
21% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (16% base case)
Terminal Value % of EV
43%
Implied Market Multiple
82.3x
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $370.83 from 31 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $218.61 per share.
Warnings
Stock-based employee pay equals 41% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $370.83 (from 31 analysts). Our estimate is 59% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions